VAT stays at 15pc
Finance Minister AMA Muhith backtracked from his earlier position to cut the VAT rate saying that the rate would be 15 percent but the number of items and firms exempted from the indirect tax will be increased under the new law.
“The reduction will upset the whole system. Even if we reduced it, it would be minimal. But it would create problems in calculation,” he said at his secretariat office yesterday.
He shared the latest position when reporters reminded him about his previous promise of a cut in VAT rate under the VAT and Supplementary Duty Act 2012, which is scheduled to be implemented from July of this year.
His comments came after a senior minister had hinted that the VAT rate might be 12 percent.
Muhith also clarified on the speculation about the possibility of multiple rates under the new law.
“One rate will be implemented,” he said, adding that there would be no multiple rates.
Earlier, Muhith had assured of giving a more comfortable rate amid concerns that application of a uniform 15 percent VAT would fuel living costs and affect small and medium businesses.
Under the existing VAT Act 1991, the government collects indirect tax at varying rates, ranging from 1.5 percent to 15 percent, on a number of goods and services.
VAT is now the biggest source of revenue for the government, followed by income tax and import duty.
Muhith, on various occasions, said the rate would be uniform but there would be some cuts.
However, he changed his stance after the final meetings on the VAT issue last week with officials of the National Board of Revenue (NBR) and Prime Minister Sheikh Hasina.
Muhith said he had obtained the 'necessary approvals' at all levels and was given 'enough freedom' in this regard.
Replying to a query on if there was a possibility of any negative impact on consumers because of the new VAT measures, he said, “No. Not at all.”
“When you get the total picture, you will see how helpful it is. You will see how many people become exempted from VAT.”
He said there is no chance of price hike of essentials under the new VAT system which will be implemented through a fully-automated process.
Muhith said all essential products will be exempted from VAT so that the prices do not rise.
He was also hopeful that there would be no protests against implementation of the new VAT law ahead of the parliamentary election to be held in 2019.
Muhith also said VAT free turnover ceiling will be raised from Tk 30 lakh a year but did not provide further details.
The upper threshold of turnover tax would be increased substantially to over Tk 1.0 crore from the present Tk 80 lakh a year, he added.
The rate of turnover tax will be increased, he said, adding that the ceiling hike will cause a huge loss of revenue for the state as up to 5,000 firms will go out of the VAT net.
To minimise the revenue loss, Muhith aims to increase compliance -- taking the number of regular VAT return filers to 50,000 from the present 32,000.
The government framed the new law to boost revenue collection from domestic trade and economic activities by increasing compliance and curbing evasion.
He said electronic fiscal devices will be installed at retail and wholesale shops to ensure compliance.
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